Bernanke says states should build bigger buffers

WASHINGTON (MarketWatch) -- Federal Reserve Chairman Ben Bernanke on Monday called for states to build up larger rainy-day funds as he said consumer spending is set to sustain the economic recovery. "Given the depth of the recent recession, even these historically high reserve-fund balances proved insufficient to buffer fully the budgets of most states," the Fed chief said from the annual meeting of the Southern Legislative Conference in Charleston, S.C. Speaking after Friday's report that showed 2.4% annualized growth in the second quarter, Bernanke predicted the U.S. consumer as well business demand should help sustain growth that has been provided so far by stimulus programs and company inventory building. "In particular, in the household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions," Bernanke said.

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